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EXHIBIT 3
[XXXXXXX XXXXX LOGO]
SECURITIES LOAN AGREEMENT
AGREEMENT dated as of June 2, 1999 between XXXXXXX XXXXX
INTERNATIONAL, as borrower ("Borrower"), and IXC INTERNET SERVICES, INC., as
lender ("Lender"). This Agreement sets forth the terms and conditions under
which Lender may, from time to time, lend to Borrower certain securities against
a pledge of collateral (each a "transaction" or a "Loan"). Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 13.
Borrower and Lender, as the parties hereto, agree as follows:
1. LOANS OF PSINET INC. COMMON STOCK.
1.1 Subject to the terms and conditions of this Agreement, the
Borrower may, upon delivery of a Borrowing Notice to Lender, initiate a Loan
whereby Lender will lend to Borrower shares of the common stock of PSINet Inc.,
par value $0.01 ("PSINet Shares"), which are fully-paid by Lender. The Borrower
shall specify in the related Borrowing Notice for each Loan the terms of such
Loan, including the number of PSINet Shares to be lent (which shall constitute
Loaned Shares for such Loan) and the amount of Collateral to be credited to
Lender, which terms may be amended during the Loan.
1.2. WITHOUT WAIVING ANY RIGHTS GIVEN TO THE LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 WILL NOT PROTECT THE LENDER WITH RESPECT TO THE LOANED SHARES.
2. DELIVERIES OF LOANED SHARES. Borrower will borrow only those PSINet Shares
that are then held on a fully-paid basis in a securities account maintained by
Borrower for Lender at Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("MLPF&S") ("Lender's Securities Account"). Unless otherwise agreed, Borrower
will accept delivery of the Loaned Shares being borrowed hereunder by causing
such Loaned Shares to be transferred on MLPF&S's books and records from Lender's
Securities Account to a proprietary account of Borrower at MLPF&S on or prior to
the Cutoff Time on the date specified by Borrower in the Borrowing Notice for
the commencement of the Loan (the "Commencement Date").
3. COLLATERAL.
3.1. Borrower shall, prior to or contemporaneous with its receipt of
the Loaned Shares, deliver to Lender cash in an amount of not less than 100% of
the market value of the Loaned Shares, which cash is to be held as Collateral by
Lender in an account to be established by
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Borrower in the name of MLPF&S for the benefit of Borrower as secured party
under the Forward Agreement and for the benefit of the Lender as secured party
under this Agreement (the "Collateral Account"). Lender shall not be entitled to
withdraw or invest the Collateral and no interest shall be paid on the
Collateral.
3.2 The Collateral delivered by Borrower to Lender, as adjusted
pursuant to Section 8 below, shall be security for Borrower's obligations in
respect to such Loan by Lender to Borrower. Subject to the first and prior
security interest in, and a lien upon the Collateral, granted to Borrower by
Lender under the Credit Support Annex to the Forward Agreement, Borrower hereby
pledges with, assigns to, and grants Lender a continuing security interest in,
and a lien upon the Collateral, which shall attach upon the delivery of the
Collateral to Lender and which shall cease upon the redelivery of the Collateral
to Borrower.
3.3. Except as provided in Section 13 hereunder, Lender shall be
obligated to return the Collateral to Borrower on termination of the Loan upon
delivery to Lender of the Loaned Shares.
3.4. If on any Business Day, Borrower delivers Collateral, as provided
in Section 3.1 hereunder and the Lender does not deliver the Loaned Shares,
Borrower shall have the absolute right to the return of the Collateral; and if,
on any Business Day, Lender delivers Loaned Shares and Borrower does not deliver
Collateral as provided in Section 3.1. hereunder, Lender shall have the absolute
right to the return of the Loaned Shares.
4. FEES FOR LOAN. It is understood and agreed by Lender that Borrower will not
pay Lender any fee, directly or indirectly, in consideration for borrowing the
Loaned Shares.
5. TERMINATION OF THE LOAN.
5.1. (a) Borrower may terminate a Loan on any Business Day by giving
notice (an "Acceleration Notice") to Lender and transferring the Loaned Shares
to Lender by the Cutoff Time on such Business Day (in such case, the
"Acceleration Date") and (b) Lender may terminate a Loan on any Business Day by
giving an Acceleration Notice to Borrower specifying the Acceleration Date for
such Loan, which shall be a date no earlier than the standard settlement date
for trades of the Loaned Shares entered into on the date of such notice.
Provided that such acceleration does not constitute a Termination Event (as
defined in the Forward Purchase Agreement) under the Forward Purchase Agreement,
Borrower shall, on or before the Cutoff Time on the Acceleration Date specified
by Lender in respect of a Loan, transfer the Loaned Shares to Lender. Upon the
transfer by Borrower of Loaned Shares pursuant to (a) or (b) above, Lender shall
transfer the Collateral (as adjusted pursuant to Section 8) to Borrower on the
applicable Acceleration Date in accordance with Section 3.
5.2. Unless otherwise accelerated pursuant to Section 5.1, on the
Termination Date of a Loan, Borrower shall redeliver to Lender the Loaned Shares
or Equivalent Shares, or cause the Loaned Shares or Equivalent Shares to be
returned to Lender by crediting the Loaned Shares or Equivalent Shares to
Lender's Securities Account; provided, however, that Borrower's obligation
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to redeliver to Lender the Loaned Shares or Equivalent Shares shall be offset to
the extent that Lender does not elect Cash Settlement (as defined in the Forward
Purchase Agreement) and Lender has an obligation to deliver to Borrower the
Number of Shares to be Delivered (as defined in the Forward Purchase Agreement)
pursuant to, and determined in accordance with, the Forward Purchase Agreement,
in which case, Borrower shall redeliver to Lender such portion of the Loaned
Shares or Equivalent Shares that exceeds the Number of Shares to be Delivered
(the "Excess Collateral Shares").
5.3. In the event that this Agreement is terminated early in
accordance with Section 11 hereof, then Borrower shall be obligated to redeliver
to Lender the Loaned Shares or Equivalent Shares, or to cause the Loaned Shares
or Equivalent Shares to be returned to Lender by crediting the Loaned Shares or
Equivalent Shares to Lender's Securities Account; provided, however, that,
without limiting any other right of setoff of the Borrower, Borrower's
obligation to redeliver to Lender the Loaned Shares or Equivalent Shares shall
be offset to the extent that Lender has an obligation to pay to Borrower amounts
in respect of the early termination of the Forward Purchase Agreement (the
"Early Termination Payment"), in which case, Borrower shall be obligated to
redeliver to Lender such portion of the Loaned Shares or Equivalent Shares that
exceeds the Early Termination Payment (the "Early Termination Excess").
6. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SHARES. Until a Loan is
terminated in accordance herewith and except as provided in Section 7, Borrower
shall have all of the incidents of ownership of the Loaned Shares, including the
right to transfer the Loaned Shares to others. Lender hereby waives the right,
if any, to vote the Loaned Shares during the term of the Loan.
7. DIVIDENDS, DISTRIBUTION, ETC.
7.1. Lender shall be entitled to receive all distributions made on or
in respect of the Loaned Shares the record dates for which are during the term
of the Loan and which are not otherwise received by Lender, to the full extent
it would be so entitled if the Loaned Shares, had not been lent to Borrower,
including, but not limited to: (a) all cash and other property, (b) stock
dividends, (c) securities received as a result of split ups of the Loaned Shares
and distributions in respect thereof, (d) interest payments, and (e) all rights
to purchase additional securities.
7.2. Borrower shall pay Lender an amount of cash equal to any cash
distribution made on or in respect of the Loaned Shares which Lender is entitled
to receive pursuant to Section 7.1 hereof. Such amount shall be paid to Lender
by Borrower upon receipt by Borrower so long as Lender is not in Default at the
time of such receipt. Upon receipt of payment of any such cash dividends,
distributions or interest by Borrower, Borrower shall forthwith pay the same
amount in cash to Lender by crediting such amount to Lender's Securities
Account. Non-cash distributions received by Borrower shall be added to the
Loaned Shares and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith deliver the same to Lender.
8. XXXX TO MARKET MARGIN.
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8.1. Borrower shall daily xxxx to the market any Loan hereunder and in
the event that at the close of trading on any Business Day the value of all the
Collateral delivered hereunder by Borrower to Lender shall be less than 100% of
the market value of all the outstanding Loaned Shares as determined by Borrower,
Borrower shall deliver additional Collateral to Lender by transferring to or
crediting additional cash to the Collateral Account by the close of the next
Business Day so that the value of the additional Collateral when added to the
value of the Collateral held for Lender in the Collateral Account prior to such
transfer shall equal no less than 100% of the market value of the Loaned Shares.
The Collateral may be delivered as provided in Section 3.1. above.
8.2. In the event that at the close of trading on any Business Day
Borrower determines that the value of the Collateral delivered hereunder by
Borrower to the Collateral Account is greater than 100% of the market value of
all the outstanding Loaned Shares, Borrower may reduce the amount of the
Collateral held in the Collateral Account by transferring from or debiting the
amount of such excess from the Collateral Account so that the value of the
Collateral then held in the Collateral Account equals no less than 100% of the
market value of the Loaned Shares. The Collateral may be delivered as provided
in Section 3.1. above.
8.3. The values of the Loaned Shares and the Collateral may be marked
to market pursuant to Sections 8, 1. and 8.2 above by valuing in the aggregate
all Loaned Shares lent by Lender and Collateral given in respect thereof by
Borrower.
9. REPRESENTATIONS. The parties hereby make the following representations and
warranties, which shall continue during the term of any Loan hereunder:
9.1 Each party hereto represents and warrants that (a) such party has
the power (i) to execute and deliver this Agreement, (ii) to enter into the
Loans contemplated hereby and (iii) to perform such party's obligations
hereunder; (b) such party has taken all necessary action to authorize such
execution, delivery and performance; and (c) this Agreement constitutes a legal,
valid and binding obligation enforceable against such party in accordance with
its terms.
9.2 Each party hereto represents and warrants that it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder.
9.3 Borrower represents and warrants that (a) it is a corporation duly
organized and validly existing under the laws of England and Wales, (b) it has,
or will have at the time of delivery of any Collateral, the right to grant a
first and prior perfected security interest therein (to the extent that such a
security interest can be granted in cash) subject to the terms and conditions
hereof, and (c) it (or the party to whom it relends the Loaned Shares) is
borrowing or will borrow the Loaned Shares for the purpose of making delivery of
such securities in the case of short sales, failure to receive securities
required to be delivered, or as otherwise permitted pursuant to Regulation U of
the Board of Governors of the Federal Reserve System.
9.4 Lender warrants and represents with respect to all Loaned Shares
transferred by it to the Borrower pursuant to this Agreement that, upon such
transfer, such Loaned Shares shall be
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free of any and all claims, liens, charges or other encumbrances in favor of
third parties. The Loaned Shares shall, on or prior to the Commencement Date of
the Loan relating to such Loaned Shares, be freely transferable and tradable,
subject only to the requirement that sales by the Borrower be made pursuant to a
registration statement that shall have been declared effective by the Securities
and Exchange Commission in connection with the public offering of PSI Net, Inc.
Common Stock, including such Loaned Shares, and Lender hereby agrees to furnish
Borrower with copies of a current prospectus, appropriately supplemented, to be
used in connection with the disposition of the Loaned Shares by Lender.
9.5 Lender represents and warrants that (a) that it has, or will have
at the time of delivery of any Loaned Shares, the right to deliver the Loaned
Shares subject to terms and conditions hereof, and (b) no Loaned Shares
delivered to Borrower hereunder for any Loan have been or shall be deemed to
have been obtained, directly or indirectly, from or using the assets of any Plan
(which term means (1) any "employee benefit plan" as defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended, or (2) any "plan"
as defined in Section 4975(e) (1) of the Internal Revenue Code of 1954, as
amended), if Borrower or any affiliate of Borrower has discretionary authority
or control with respect to the assets of such Plan or renders investment advice
(within the meaning of 29 C.F.R Section 2510.3(c)) with respect to the
investment of the assets of such Plan.
9.6 Each party shall on the date of delivery of Loaned Shares to
Borrower and on the date of return of Loaned Shares to Lender, be deemed to
repeat and reaffirm, as the date of such delivery or return, the foregoing
representatives made by it.
10. COVENANTS.
10.1 Each party agrees that this Agreement and the Loans made
hereunder shall be "securities contracts" for purposes of the Bankruptcy Code
and any bankruptcy proceeding thereunder. Notwithstanding anything to the
contrary contained in this Agreement, it is the intention of the parties hereto
that this Agreement be treated and construed as an agreement meeting the
requirements of Section 1058 of the Internal Revenue Code of 1954, as amended.
10.2 Each party agrees to be liable as principal with respect to its
obligations hereunder.
10.3 The Lender shall, if it is a party to this Agreement as a Plan or
a trustee of a Plan, so notify Borrower upon the execution of this Agreement. If
the Lender so notifies Borrower, Borrower shall promptly notify the Lender
whether Borrower or any of its affiliates has discretionary authority or control
with respect to the assets of the Lender or of such (as the case may be) or
renders investment advice within the meaning of 29 C.F.R. Section 2510.3-21(c)
with respect to the investment of the assets of the Lender or of such Plan (as
the case may be). If the Lender notifies Borrower that it is a party to this
Agreement as a plan or a trustee of Plan, Borrower and Lender shall comply with
the requirements of the Exemption published by the United States Department of
Labor at 46 Fed. Reg. 7527.
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11. EARLY TERMINATION.
11.1 All Loans between Borrower and Lender may (at the option of the
non-defaulting party, exercised by notice to the defaulting party) be terminated
upon the occurrence of any one or more of the following events (each, a
"Default"):
(a) if any Loaned Shares shall not be delivered to Borrower on
the specified Commencement Date of a Loan;
(b) if any Loaned Shares shall not be delivered to Lender on the
specified Termination Date of a Loan;
(c) if any Collateral shall not be delivered to Borrower on the
specified Termination Date of a Loan;
(d) if either party shall fail to deliver or return Collateral as
the case may be, required by Section 8 hereof; and
(e) if either party shall fail to make the payment of
distributions as required by Section 7 hereof and such
default is not cured within one Business Day of notice of
such failure to Borrower or Lender, as the case may be.
11.2 All Loans between Borrower and Lender will be terminated upon the
designation of an Early Termination Event in respect of any Event of Default or
Termination Event (each as defined in the Forward Purchase Agreement) (a "Cross
Default").
11.3 Upon the occurrence of any Default or Cross Default, any required
payments or deliveries hereunder shall be made on the Early Termination Date (as
defined in the Forward Purchase Agreement).
12. TRANSFER TAXES. All transfer taxes with respect to the transfer of the
Loaned Shares by Lender to Borrower and by Borrower to Lender upon termination
of the Loan shall be paid by Borrower.
13. DEFINITIONS. For the purpose hereof:
13.1 "Business Day" shall mean any day recognized as a settlement day
by the New York Stock Exchange, Inc.
13.2 "Borrowing Notice" shall mean the Borrowing Notice delivered to
Lender by Borrower substantially in the form of Exhibit A hereto.
13.3 "Cutoff Time" shall mean 4:00 p.m. in the City of New York.
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13.4 "Forward Purchase Agreement" shall mean the ISDA Master
Agreement, dated as of June 2, 1999, including the Schedule and all annexes
thereto and the Confirmation dated June 3, 1999 relating to shares of PSINet
Inc., between Xxxxxxx Xxxxx International ("MLI"), acting through its agent,
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, and Lender, pursuant to
which MLI has agreed to purchase from Lender and Lender has agreed to deliver
the Number of Shares to be Delivered to MLI.
13.5 "Loan" shall mean a loan of securities hereunder.
13.6 "Loaned Shares" shall mean any shares of PSINet Inc., par value
$0.01 per share, which are delivered in connection with a Loan hereunder until
Borrower credits the Lender's account or the certificate for such security (or
identical security) is transferred or delivered to the Lender's Securities
Account or otherwise accepted back by the Lender hereunder or until the security
shall be replaced by purchase, except that, if any new or different security
shall be exchanged for any Loaned Shares by recapitalization, merger,
consolidation or other corporate action, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Share in substitution
for each former Loaned Share for which such exchange was made. For the avoidance
of doubt, the Loaned Shares shall be subject to adjustment from time to time so
as to have the same meaning as the "Shares" in the Forward Purchase Agreement.
13.7 "Equivalent Shares" means, with respect to any Loaned Shares,
shares of the same issue, class and series as such Loaned Shares or the
equivalent in the event of any reorganization, merger or other action by the
issuer of such Loaned Shares.
13.8 "Termination Date" shall mean the Settlement Date (as defined in
the Forward Purchase Agreement), unless otherwise specified in the related
Borrowing Notice or Termination Notice for a Loan.
14. MARKET VALUE
14.1. Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange, their market value
shall be determined for all purposes by their last sale price on the next
preceding day on which there was a sale on any such exchange, Consolidated Tape,
then as quoted by any such exchange.
14.2 Unless otherwise agreed, if the principal market for the
securities to be valued is the over-the counter market, their market value shall
be determined as follows. If the securities are quoted on the Nasdaq Stock
Market ("Nasdaq"), their market value shall be the closing sale price on Nasdaq,
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on Nasdaq, the closing bid price on such date. If the
securities to be valued are not quoted on Nasdaq, their market value shall be
the highest bid quotations as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotation sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did
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not exist on each day, then the relevant quotation on the next preceding day in
which there was such a quotation shall be the market value.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such state, without reference to its conflicts
of laws principles or rules.
16. WAIVER. The failure of either party to insist upon strict adherence to that
party of the right thereafter to insist upon strict adherence to that term of
any other term of this Agreement. All waivers in respect of a Default must be in
writing.
17. REMEDIES. All remedies hereunder shall survive the termination of the Loan,
return of Excess Collateral Shares or the Early Termination Excess, as
applicable, and termination of this Agreement.
18. MISCELLANEOUS. This Agreement supersedes any other agreement between the
parties concerning loans of securities between the parties hereto. This
Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, representatives, successors and assigns. This Agreement shall
not be modified, except by an instrument in writing signed by the party against
whom enforcement is sought.
XXXXXXX XXXXX INTERNATIONAL
By: /s/ XXXXX XXXXXX
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Name: Xxxxx Xxxxxx
Title: Vice President
IXC INTERNET SERVICES, INC.
By: /s/ XXXXX X. XXXXXXX
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Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
and Chief Financial Officer
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